[Federal Register Volume 69, Number 185 (Friday, September 24, 2004)]
[Notices]
[Pages 57368-57373]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-2360]


=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-26601; 812-13123]


Allianz Dresdner Asset Management of America, L.P., et al.; 
Notice of Application

September 17, 2004.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Temporary order and notice of application for a permanent order 
under section 9(c) of the Investment Company Act of 1940 (the ``1940 
Act'').

-----------------------------------------------------------------------

Summary of Application: Applicants have received a temporary order 
exempting them from section 9(a) of the 1940 Act, with respect to a 
consent order and final judgment entered by the Superior Court of New 
Jersey, Chancery Division--General Equity of Essex County (``New Jersey 
Superior Court'') on June 1, 2004 (the ``New Jersey Order''), until the 
earlier of September 13, 2006, or the date the Commission takes action 
on the application for a permanent order. Applicants also have 
requested a permanent order.

Applicants: Allianz Dresdner Asset Management of America L.P. 
(``ADAM''); PA Distributors LLC (``PAD''), PEA Capital LLC (``PEA''); 
PA Fund Management LLC (``PAFM'') (collectively, the ``Consent 
Parties''); Allianz Life Insurance Company of North America (``Allianz 
Life NA''); Allianz Life Insurance Company of New York (``Allianz Life 
NY''); Cadence Capital Management LLC; Caywood Scholl Capital 
Management LLC (``Caywood Scholl''); Dresdner Advisors LLC 
(``Dresdner''); NFJ Investment Group L.P. (``NFJ''); Nicholas-Applegate 
Capital Management LLC and Nicholas-Applegate Securities LLC (together, 
``Nicholas-Applegate''); OCC Distributors LLC, OpCap Advisors LLC and 
Oppenheimer Capital LLC (together, ``Oppenheimer''); Pacific Investment 
Management Company LLC (``PIMCO''); PA Retail Holdings LLC (``PA 
Retail''); RCM Capital Management LLC (``RCM''); US Allianz Advisers 
LLC and US Allianz Investor Services LLC (together, ``US Allianz'') 
(collectively, the ``Separate Parties,'' and together with the Consent 
Parties, the ``Applicants'').\1\
---------------------------------------------------------------------------

    \1\ Applicants request that any relief granted pursuant to the 
application also apply to any other existing company with respect to 
which ADAM, PAD or PEA is an affiliated person (which subsequently 
becomes an investment adviser, subadviser, depositor or principal 
underwriter for any registered investment company) and to any other 
company with respect to which ADAM, PAD or PEA may become an 
affiliated person in the future (included in the term 
``Applicants'').

Filing Date: The application was filed on September 17, 2004.
    Hearing or Notification of Hearing: A permanent order granting the 
requested relief will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary and serving applicants with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on October 12, 2004, and should be accompanied by proof of 
service on applicants, in the form of an affidavit or, for lawyers, a 
certificate of service. Hearing requests should state the nature of the 
writer's interest, the reason for the request, and the issues 
contested. Persons who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth 
Street, NW., Washington, DC 20549-0609. Applicants: ADAM, 888 San 
Clemente Drive, Suite 100, Newport Beach, CA 92660; PAD, 2187 Atlantic 
Street, Stamford, CT 06902; PEA and PAFM,

[[Page 57369]]

1345 Avenue of the Americas, New York, NY 10105; Allianz Life NA and US 
Allianz, 5701 Golden Hills Drive, Minneapolis, MN 55416; Allianz Life 
NY, 152 West 57th Street, 18th Floor, New York, NY 10019; Cadence 
Capital Management LLC, 265 Franklin Street, Boston, MA 02110; Caywood 
Scholl, Four Embarcadero Center, 28th Floor, San Francisco, CA 94111; 
Dresdner, 1301 Avenue of the Americas, 36th Floor, New York, NY 10019; 
NFJ, 2121 San Jacinto Street, Suite 1840, Dallas, TX, 75201; Nicholas-
Applegate, 600 West Broadway, San Diego, CA 92101; Oppenheimer and PA 
Retail, 1345 Avenue of the Americas, New York, 49th Floor, NY 10105; 
PIMCO, 840 Newport Center Drive, Newport Beach, CA 92660; and RCM, Four 
Embarcadero Center, San Francisco, CA 94111.

FOR FURTHER INFORMATION CONTACT: Julia Kim Gilmer, Senior Counsel, at 
(202) 942-0528, or Janet M. Grossnickle, Branch Chief, at (202) 942-
0564 (Division of Investment Management, Office of Investment Company 
Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee at the 
Commission's Public Reference Branch, 450 Fifth Street, NW., 
Washington, DC 20549-0102 tel. (202) 942-8090).

Applicants' Representations

    1. ADAM, a limited partnership organized under the laws of 
Delaware, is registered as an investment adviser under the Investment 
Advisers Act of 1940 (``Advisers Act''). PAD, a Delaware limited 
liability company is registered as a broker-dealer under the Securities 
Exchange Act of 1934 (``Exchange Act''). PAD serves as distributor, 
principal underwriter and/or depositor to various registered investment 
companies. PEA, a Delaware limited liability company is registered as 
an investment adviser under the Advisers Act. PEA currently serves as 
investment adviser and subadviser to various registered investment 
companies. PAFM, a Delaware limited liability company, is a wholly-
owned indirect subsidiary of ADAM that is registered as an investment 
adviser under the Advisers Act. PAFM currently serves as investment 
adviser for various registered investment companies. Registered 
investment companies to which one or more of the Consent Parties serve 
as depositor, distributor, principal underwriter or primary investment 
adviser are referred to as ``Consent Party Funds.'' Registered 
investment companies to which one or more Consent Parties serve solely 
as an investment subadviser are referred to as ``Sub-advised Funds.'' 
The Separate Parties are controlled by, or under common control with 
ADAM, PAD or PEA and serve as depositor, principal underwriter, 
investment adviser or subadviser for one or more registered investment 
companies (``Non-Party Funds,'' collectively with the Consent Party 
Funds and the Sub-advised Funds, the ``Funds'').
    2. On February 17, 2004, the Attorney General of New Jersey 
(``NJAG'') filed an action in the New Jersey Superior Court against 
ADAM, PAD and PEA, among others, relating to market timing abuses 
involving certain Funds advised by PAFM and subadvised by PEA (the 
``Complaint'').\2\ The Complaint alleged misconduct and fraudulent and 
deceptive acts and practices related to, among other matters, (a) PEA's 
arrangement with a broker-dealer permitting Canary Capital Partners, 
LLC and Canary Investment Management LLC (collectively, ``Canary'') to 
market time certain Consent Party Funds in return for ``sticky assets'' 
from which ADAM, PAD and PEA benefited; (b) PEA's facilitation of 
Canary's market timing transactions by disclosing to Canary's broker-
dealer otherwise non-public information regarding the portfolio 
holdings of certain Consent Party Funds; and (c) PEA's arrangement with 
PAD employees responsible for preventing market timing in these Consent 
Party Funds to permit Canary to engage in market timing transactions. 
Without admitting or denying the allegations in the Complaint, ADAM, 
PAD and PEA consented to the entry of the New Jersey Order, which 
prohibited, among other activities, certain disclosures of portfolio 
holdings. The New Jersey Order also required the Consent Parties to 
institute various corporate governance changes and management changes.
---------------------------------------------------------------------------

    \2\ Harvey v. Allianz Dresdner Asset Management of America L.P., 
et al., No. C-54-04 (Super. Ct. N.J., Feb. 17, 2004).
---------------------------------------------------------------------------

    3. On September 7, 2004, PEA, PAD and PAFM submitted offers of 
settlement and consented to the entry by the Commission of an Order 
Instituting Administrative and Cease-and-Desist Proceedings, Making 
Findings and Imposing Remedial Sanctions and a Cease-and-Desist Order 
Pursuant to Section 15(b) of the Exchange Act, Sections 203(e) and 
203(k) of the Advisers Act and Sections 9(b) and 9(f) of the 1940 Act 
relating to similar conduct (``Commission Order'').\3\ The Commission 
Order notes that, in determining to accept the settlement offer, the 
Commission considered that certain Consent Party Funds have voluntarily 
undertaken to operate in accordance with the following policies and 
practices:
---------------------------------------------------------------------------

    \3\ In the Matter of PA Fund Management LLC, et al., 
Administrative Proceeding File No. 3-11645, Investment Advisers Act 
Release No. 2292 (September 13, 2004).
---------------------------------------------------------------------------

    a. No more than 25 percent of the members of the board of Trustees 
(``Board'') of these Consent Party Funds will be persons who either (i) 
were directors, officers or employees of PEA, PAD or PAFM at any point 
during the preceding 10 years or (ii) are interested persons, as 
defined in the 1940 Act, of that Consent Party Fund or of PEA, PAD or 
PAFM. In the event that a Board fails to meet this requirement at any 
time due to the death, resignation, retirement or removal of any 
independent Trustee, the independent Trustees will take such steps as 
may be necessary to bring the Board in compliance within a reasonable 
period of time; and
    b. No chairman of the Board of these Consent Party Funds will 
either (i) have been a director, officer or employee of PEA, PAD or 
PAFM at any point during the preceding 10 years or (ii) be an 
interested person, as defined in the 1940 Act, of that Consent Party 
Fund or of PEA, PAD or PAFM; and
    c. Any person who acts as counsel to the independent Trustees of 
these Consent Party Funds will be an ``independent legal counsel'' as 
defined by Rule 0-1 under the 1940 Act; and
    d. No action will be taken by the Board or by any of its committees 
unless such action is approved by a majority of the members of the 
Board or of such committee, as the case may be, who are neither (i) 
persons who were directors, officers or employees of PEA, PAD or PAFM 
at any point during the preceding 10 years nor (ii) interested persons, 
as defined in the 1940 Act, of these Consent Party Funds or of PEA, PAD 
or PAFM. In the event that any action proposed to be taken is opposed 
by a majority vote of the independent Trustees of these Consent Party 
Funds, then that Consent Party Fund will, in its shareholder report for 
such period, disclose such proposal, the related board vote, and the 
reason, if any, for such independent Trustees' vote against the 
proposal.
    e. Commencing in 2005 and not less than every fifth calendar year 
thereafter, these Consent Party Funds will hold a meeting of 
shareholders at which their Boards will be elected.
    f. Effective immediately, these Consent Party Funds shall comply 
with Rule 38a-1 under the 1940 Act,

[[Page 57370]]

notwithstanding the October 5, 2004 compliance date for the rule as 
adopted by the Commission.
    4. Under the Commission Order, PEA, PAD and PAFM will, among other 
things, maintain a compliance and ethics oversight infrastructure 
having the following characteristics:
    a. PEA and PAFM shall maintain a Code of Ethics Oversight Committee 
having responsibility for all matters relating to issues arising under 
the Adviser Code of Ethics. The Code of Ethics Oversight Committee 
shall be comprised of senior executives of PEA, PAD and PAFM's 
operating businesses. PEA and PAFM shall hold at least quarterly 
meetings of the Code of Ethics Oversight Committee to review violations 
of the Code of Ethics, as well as to consider policy matters relating 
to the Code of Ethics. PEA, PAD and PAFM shall report on issues arising 
under the Code of Ethics, including all violations thereof, to the 
Audit Committee of the Trustees of certain Consent Party Funds with 
such frequency as the Audit Committee may instruct, and in any event at 
least quarterly, provided however that any material violation shall be 
reported promptly.
    b. PEA, PAD and PAFM shall establish an Internal Compliance 
Controls Committee to be chaired by the Director of Compliance for ADAM 
(or if he so designates, PAFM's Chief Compliance Officer), which 
Committee shall have as its members senior executives of PEA, PAD and 
PAFM's operating businesses. Notice of all meetings of the Internal 
Compliance Controls Committee shall be given to the outside independent 
counsel of the Board of certain Consent Party Funds, who shall be 
invited to attend and participate in such meetings provided that the 
involvement of the outside independent counsel of the Board shall be 
limited to compliance issues relating to those Consent Party Funds. The 
Internal Compliance Controls Committee shall review compliance issues 
throughout the businesses of PEA, PAD and PAFM, endeavor to develop 
solutions to those issues as they may arise from time to time, and 
oversee implementation of those solutions. The Internal Compliance 
Controls Committee shall provide reports on internal compliance matters 
to the Boards of certain Consent Party Funds with such frequency as the 
Boards of such Consent Party Funds may reasonably instruct, and in any 
event at least quarterly. PEA, PAD and PAFM shall also provide to the 
Audit Committees of PEA, PAD and PAFM the same reports of the Code of 
Ethics Oversight Committee and the Internal Compliance Controls 
Committee that it provides to the Audit Committee of these Consent 
Party Funds.
    c. PEA, PAD and PAFM shall, at their own expense, cause there to be 
a senior-level employee whose responsibilities shall include compliance 
matters related to conflicts of interests relating to the business of 
PEA, PAD and PAFM, as the case may be. This officer will report 
directly to the Chief Compliance Officers of PEA, PAD and PAFM and 
shall have oversight over compliance matters related to conflicts of 
interests at PEA, PAD and PAFM.
    d. PEA, PAD and PAFM shall require the Chief Compliance Officer of 
each of PEA, PAD and PAFM to report to the Chief Compliance Officer of 
certain Consent Party Funds who shall report to the Board of such 
Consent Party Funds any breach of fiduciary duty owed to the Board and/
or violations of the Federal securities laws of which he or she becomes 
aware in the course of carrying out his or her duties, with such 
frequency as the Board may instruct, and in any event at least 
quarterly, provided however that any material breach (i.e., any breach 
that would be important, qualitatively or quantitatively, to a 
reasonable Trustee) shall be reported promptly.
    e. PEA, PAD and PAFM shall establish a corporate ombudsman to whom 
their employees may convey concerns about business matters that they 
believe implicate matters of ethics or questionable practices. PEA, PAD 
and PAFM shall establish procedures to investigate matters brought to 
the attention of the ombudsman, and these procedures shall be presented 
for review and approval by the independent Trustees of certain Consent 
Party Funds. PEA, PAD and PAFM shall also review matters brought to the 
attention of the ombudsman, along with any resolution of such matters, 
with the independent Trustees of certain Consent Party Funds with such 
frequency as the independent Trustees of such Consent Party Funds may 
instruct.
    f. Effective immediately, PEA, PAD and PAFM will comply with Rule 
206(4)-7 under the Advisers Act, notwithstanding the October 5, 2004 
compliance date for each rule as adopted by the Commission.
    5. In addition, under the Commission Order:
    a. PEA, PAD and PAFM shall retain, within 60 days of the date of 
entry of the Commission Order, the services of an Independent 
Compliance Consultant not unacceptable to the staff of the Commission 
and a majority of the independent Trustees of certain Consent Party 
Funds. The Independent Compliance Consultant's compensation and 
expenses shall be borne exclusively by PEA, PAD and PAFM or their 
affiliates. PEA, PAD and PAFM shall require that the Independent 
Compliance Consultant conduct a comprehensive review of PEA, PAD and 
PAFM's supervisory, compliance, and other policies and procedures 
designed to prevent and detect breaches of fiduciary duty, breaches of 
the Code of Ethics and Federal securities law violations by PEA, PAD 
and PAFM and their employees. This review shall include, but shall not 
be limited to, a review of PEA, PAD and PAFM's market timing controls 
across all areas of its business, a review of certain Consent Party 
Funds' pricing practices that may make those funds vulnerable to market 
timing, a review of certain Consent Party Funds' utilization of short 
term trading fees and other controls for deterring excessive short term 
trading, and a review of PEA, PAD and PAFM's policies and procedures 
concerning conflicts of interest, including conflicts arising from 
advisory services to multiple clients. PEA, PAD and PAFM shall 
cooperate fully with the Independent Compliance Consultant and shall 
provide the Independent Compliance Consultant with access to their 
files, books, records, and personnel as reasonably requested for the 
review.
    b. PEA, PAD and PAFM shall require that, at the conclusion of the 
review, which in no event shall be more than 120 days after the date of 
entry of the Commission Order, the Independent Compliance Consultant 
shall submit a Report to PEA, PAD and PAFM, the Trustees of certain 
Consent Party Funds, and the staff of the Commission. The Report shall 
address the issues described above, and shall include a description of 
the review performed, the conclusions reached, the Independent 
Compliance Consultant's recommendations for changes in or improvements 
to policies and procedures of PEA, PAD and PAFM and certain Consent 
Party Funds, and a procedure for implementing the recommended changes 
in or improvements to PEA, PAD and PAFM's policies and procedures.
    c. PEA, PAD and PAFM shall adopt all recommendations with respect 
to PEA, PAD and PAFM contained in the Report of the Independent 
Compliance Consultant; provided, however, that within 150 days after 
the date of entry of the Commission Order, PEA, PAD and PAFM shall in 
writing advise the Independent Compliance Consultant, the Trustees of 
certain Consent Party Funds and the staff of the Commission

[[Page 57371]]

of any recommendations that they consider to be unnecessary or 
inappropriate. With respect to any recommendation that PEA, PAD and 
PAFM consider unnecessary or inappropriate, PEA, PAD and PAFM need not 
adopt that recommendation at that time but shall propose in writing an 
alternative policy, procedure or system designed to achieve the same 
objective or purpose.
    d. As to any recommendation with respect to PEA, PAD and PAFM's 
policies and procedures on which PEA, PAD and PAFM and the Independent 
Compliance Consultant do not agree, such parties shall attempt in good 
faith to reach an agreement within 180 days of the date of entry of the 
Commission Order. In the event PEA, PAD and PAFM and the Independent 
Compliance Consultant are unable to agree on an alternative proposal 
acceptable to the staff of the Commission, PEA, PAD and PAFM will abide 
by the determinations of the Independent Compliance Consultant.
    e. PEA, PAD and PAFM (i) shall not have the authority to terminate 
the Independent Compliance Consultant, without the prior written 
approval of the majority of independent Trustees and the staff of the 
Commission; (ii) shall compensate the Independent Compliance 
Consultant, and persons engaged to assist the Independent Compliance 
Consultant, for services rendered pursuant to the Commission Order at 
their reasonable and customary rates; and (iii) shall not be in and 
shall not have an attorney-client relationship with the Independent 
Compliance Consultant and shall not seek to invoke the attorney-client 
or any other doctrine or privilege to prevent the Independent 
Compliance Consultant from transmitting any information, reports, or 
documents to the Trustees or the Commission.
    f. PEA, PAD and PAFM shall require that the Independent Compliance 
Consultant, for the period of the engagement and for a period of two 
years from completion of the engagement, shall not enter into any 
employment, consultant, attorney-client, auditing or other professional 
relationship with PEA, PAD or PAFM, or any of their present or former 
affiliates, directors, officers, employees, or agents acting in their 
capacity as such. PEA, PAD and PAFM shall require that any firm with 
which the Independent Compliance Consultant is affiliated in 
performance of his or her duties under the Order shall not, without 
prior written consent of the independent Trustees and the staff of the 
Commission, enter into any employment, consultant, attorney-client, 
auditing or other professional relationship with PEA, PAD or PAFM, or 
any of their present or former affiliates, directors, officers, 
employees, or agents acting in their capacity as such for the period of 
the engagement and for a period of two years after the engagement.
    g. Commencing in 2006, and at least once every other year 
thereafter, PEA, PAD and PAFM shall undergo a compliance review by a 
third party, who is not an interested person, as defined in the 1940 
Act, of PEA, PAD or PAFM. At the conclusion of the review, the third 
party shall issue a report of its findings and recommendations 
concerning PEA, PAD and PAFM's supervisory, compliance, and other 
policies and procedures designed to prevent and detect breaches of 
fiduciary duty, breaches of the Code of Ethics and Federal securities 
law violations by PEA, PAD or PAFM and their employees in connection 
with their duties and activities on behalf of and related to certain 
Consent Party Funds. Each such report shall be promptly delivered to 
PEA, PAD and PAFM's Internal Compliance Controls Committee and to the 
Audit Committee of the Board for PEA, PAD and PAFM.
    6. In addition to provisions relating to disgorgement and civil 
money penalties and the distribution of these amounts, PEA, PAD and 
PAFM have undertaken in the Commission Order that no later than twenty-
four months after the date of entry of the Commission Order, the chief 
executive officers of PEA, PAD and PAFM will certify to the Commission 
in writing that PEA, PAD and PAFM have fully adopted and complied in 
all material respects with certain undertakings in the Commission Order 
including those described in paragraphs 4 and 5 above, and with the 
recommendations of the Independent Compliance Consultant or, in the 
event of material non-adoption or non-compliance, shall describe such 
material non-adoption and non-compliance. PEA, PAD and PAFM also have 
undertaken to preserve for a period not less than six years from the 
end of the fiscal year last used, the first two years in an easily 
accessible place, any record of each of PEA, PAD and PAFM's compliance 
with these undertakings.
    7. Applicants note that PEA, PAD and PAFM have also submitted 
offers of settlement and consented to the entry by the Commission of 
another Order Instituting Administrative and Cease-and-Desist 
Proceedings, Making Findings and Imposing Remedial Sanctions and a 
Cease-and-Desist Order relating to certain alleged failures to disclose 
conflicts of interest arising from PAD's arrangements with various 
broker-dealers for increased ``shelf space'' within those broker-
dealers' distribution systems (``Shelf Space Order'').\4\ Applicants 
state that the Shelf Space Order contains undertakings, similar to 
those described above, focused on monitoring and disclosing certain 
conflicts of interest arising in connection with the distribution of 
shares of certain Consent Party Funds.
---------------------------------------------------------------------------

    \4\ In the Matter of PA Fund Management LLC et al., 
Administrative Proceeding File No. 3-11661, Investment Advisers Act 
Release No. 2295 (September 15, 2004). PEA, PAD and PAFM also agreed 
to a Final Judgment Pursuant to Stipulation that settled an action, 
relating to the same conduct, brought by the California Attorney 
General. The People of the State of California, v. PA Distributors 
LLC., No. 04AS03699 (Super. Ct. CA., September 15, 2004) (the 
``California Order'').
---------------------------------------------------------------------------

Applicants' Legal Analysis

    1. Section 9(a)(2) of the 1940 Act, in relevant part, prohibits a 
person who has been enjoined from engaging in or continuing any conduct 
or practice in connection with its activities as an investment adviser 
or underwriter from acting as an investment adviser or depositor of any 
registered investment company or a principal underwriter for any 
registered open-end investment company, registered unit investment 
trust or registered face-amount certificate company. Section 9(a)(3) of 
the 1940 Act makes the prohibition in section 9(a)(2) applicable to a 
company, any affiliated person of which has been disqualified under the 
provisions of section 9(a)(2). Section 2(a)(3) of the 1940 Act, in 
relevant part, defines ldquo;affiliated person'' to include any person 
directly or indirectly controlling, controlled by, or under common 
control with, the other person. Each of the other Applicants is an 
affiliated person of ADAM, PAD or PEA within the meaning of section 
2(a)(3) of the 1940 Act. Applicants do not concede that the New Jersey 
Order would disqualify the Applicants, but in order to resolve any 
uncertainty, the Applicants seek temporary and permanent orders 
exempting them from the disqualification provisions of section 9(a) of 
the 1940 Act with respect to the New Jersey Order.
    2. Section 9(c) of the 1940 Act provides that the Commission shall 
grant an application for exemption from the disqualification provisions 
of section 9(a) if it is established that these provisions, as applied 
to the Applicants, are unduly or disproportionately severe or that the 
Applicants' conduct has been such as not to make it against the public 
interest or the protection of investors to grant the application. 
Applicants further

[[Page 57372]]

submit that the conduct of Applicants has been such as not to make it 
against the public interest or protection of investors to grant the 
exemption and that the conduct that served as the basis for the 
disqualification has been remedied.
    3. With respect to the Consent Parties, Applicants state that the 
New Jersey Order and the Commission Order provide for a series of 
actions to be taken by the Consent Parties in connection with the 
Consent Parties' continued relationship with certain Consent Party 
Funds. In settling their proceedings against the Consent Parties, 
neither the NJAG nor the Commission sought to bar them from providing 
advisory and underwriting services to Funds. Applicants further state 
that the senior managers that were alleged to have approved the 
activities underlying the Commission Order are no longer employed by 
the Consent Parties. Applicants submit that the measures the Consent 
Parties voluntarily undertook and those they are required to undertake 
under the New Jersey Order and the Commission Order were designed to 
ensure both the integrity of their compliance processes and investor 
protection on a going forward basis.\5\ Applicants thus believe that 
these measures address the public interest and investor protection 
concerns underlying section 9(a) of the 1940 Act.
---------------------------------------------------------------------------

    \5\ Similarly, Applicants submit that the measures the Consent 
Parties voluntarily undertook and those they are required to 
undertake under the Shelf Space Order and California Order were 
designed to ensure both the integrity of their compliance processes 
and investor protection on a going forward basis.
---------------------------------------------------------------------------

    4. Applicants state that the alleged activities giving rise to the 
New Jersey Order and the Commission Order did not involve any 
activities on the part of the Separate Parties. Applicants submit that 
no current or former officer, director or employee of the Separate 
Parties who was or is involved in providing advisory, subadvisory, 
depository or principal underwriting services to any of the Funds was 
involved in the conduct that forms the basis of the New Jersey Order or 
the Commission Order. Applicants further represent that the Separate 
Parties conduct their own investment advisory and underwriting 
activities separate from the activities of the Consent Parties in their 
capacities as fiduciaries for the Non-Party Funds and other clients. 
Moreover, as far as the Separate Parties are aware, none of the 
officers, directors, portfolio managers, any other investment personnel 
or any other employee of any Separate Party had any knowledge of any 
allegedly illegal conduct underlying the New Jersey Order or the 
Commission Order.\6\ Accordingly, Applicants submit that the granting 
of an exemption under the Application with respect to the Separate 
Parties would be consistent with the public interest and the protection 
of investors.
---------------------------------------------------------------------------

    \6\ Similarly, Applicants submit that the alleged activities 
giving rise to the Shelf Space Order did not involve any of the 
Separate Parties. No current or former officer, director or employee 
of any Separate Party had knowledge of any allegedly illegal conduct 
underlying the Shelf Space Order, or was involved in such 
activities.
---------------------------------------------------------------------------

    5. Applicants argue that any inability to continue providing 
advisory and underwriting services to the Funds would disrupt the Funds 
unnecessarily and operate to the detriment of the financial interests 
of the Funds and their shareholders. Applicants state that the Funds 
would incur significant time, effort and expense to replace the 
Applicants with other investment advisers, subadvisers, principal 
underwriters and depositors. Applicants also believe that uncertainty 
resulting from a bar to the Applicants' serving the Funds in such 
capacities might result in large net redemptions of Fund shares and net 
outflows of cash, which could adversely affect efforts to manage the 
Funds' assets and could increase the Funds' expense ratios to the 
detriment of remaining shareholders.
    6. Applicants will prepare written materials regarding the New 
Jersey Order and the Commission Order, and their impact on the Funds 
(together with the Application, the ``Written Materials'') for the 
Boards of the Funds, including the trustees who are not ``interested 
persons'' as defined in Section 2(a)(19) of the 1940 Act (``Independent 
Trustees'') and their independent legal counsel as defined in rule 0-
1(a)(6) under the 1940 Act (``Independent Counsel''). Applicants state 
that they will, as soon as reasonably practicable, distribute the 
Written Materials to, and discuss them with, the Boards of the Consent 
Party Funds, including the Independent Trustees and their Independent 
Counsel. Applicants also will distribute, as soon as reasonably 
practicable, the Written Materials and an offer to meet in person to 
discuss them, to the Boards of the Sub-Advised Funds and the Non-Party 
Funds, including their Independent Trustees and their Independent 
Counsel, if any. Applicants also undertake to provide the Boards of all 
the Funds with all information concerning the New Jersey Order and the 
Commission Order and the application necessary for the Funds to fulfill 
their disclosure and other obligations under the federal securities 
laws.
    7. Finally, Applicants state that, if they were deemed to be barred 
under section 9(a) of the 1940 Act from providing investment advisory 
and distribution services to the Funds, and were unable to obtain the 
requested exemption, the effect on their business and employees would 
be severe. The Applicants have committed substantial resources to 
establishing their businesses of advising and underwriting registered 
investment companies. The Applicants state that prohibiting them from 
providing advisory and distribution services to the Funds would 
adversely affect not only Applicants' businesses, but also the 
livelihoods of over 3500 employees. For these reasons, the Applicants 
believe the prohibitions of section 9(a) as applied to them would be 
unduly and disproportionately severe.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. Any temporary exemption granted pursuant to the application 
shall be without prejudice to, and shall not limit the Commission's 
rights in any manner with respect to, any Commission investigation of, 
or administrative proceedings involving or against, Applicants, 
including without limitation, the consideration by the Commission of a 
permanent exemption from section 9(a) of the 1940 Act requested 
pursuant to the application or the revocation or removal of any 
temporary exemptions granted under the 1940 Act in connection with the 
application.
    2. PEA, PAD and PAFM will comply with the terms and undertakings 
set forth in the Commission Order.

Temporary Order

    The Commission has considered the matter and finds that Applicants 
have made the necessary showing to justify granting a temporary 
exemption.
    Accordingly, it is hereby ordered, pursuant to section 9(c) of the 
1940 Act, that the Applicants are granted a temporary exemption from 
the provisions of section 9(a), effective immediately, solely with 
respect to the New Jersey Order, subject to the conditions in the 
application, until the date the Commission takes final action on their 
application for a permanent order or, if earlier, September 13, 2006.


[[Page 57373]]


    By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E4-2360 Filed 9-23-04; 8:45 am]
BILLING CODE 8010-01-P